MSA Guidelines In Liability Cases

My client fell in December 2007 and had to undergo a total knee replacement in 2008.  All medical coverage provided through her employer's group plan; with a 3rd party lien of $55k.  My client retires in June 2009 at age of 72. The client's primary insurance is now Medicare.  Should we go through a CMS Review to determine whether or not a MSA will be required for questionable future follow-up care?

Hawaii Attorney

Medicare's Part with Social Security Claims

I represent a 55 year old woman who has been receiving Social Security total disability benefits for years.  Her medical problems are prolific.   She has never applied for nor received Medicare benefits.  In January 20008, she fell and broke her wrist and ankle.  This week, at mediation, the Defense offered $45k (a very good settlement under the circumstances) to settle all claims (including a substantial private subrogation claim) contingent upon receiving a release from Medicare.  Both her doctor and the insurance company doctor indicated that she will need no future care for these injuries, and, as indicated above, Medicare has not paid a dime, nor is she currently receiving Medicare benefits.  This is my "introduction" into the potential claims that Medicare may make.  Given the relatively small nature of the settlement, it is hard for me to believe that Medicare would be very interested in this; however, I am not certain as to how to proceed.  Can you provide some guidance and/or cite chapter and verse as to where I should begin looking?  Thank you in advance.

Minnesota Attorney

Medicare Compliance in Motor Vehicle Accidents

I am trying to settle a Motor Vehicle Accident case with a knee injury. My client was born 12/02/45 making him more than 62 1/2 years old and Medicare eligible in 30 months or less. Settlement will be less than 100,000. There is a 50% chance of having knee replacement surgery at some point in the future. Treating Ortho says total medical costs in today’s dollars approximately $20,000. The client is eligible for No-Fault medical. Approximately $14,000 left available. What needs to be done as far as Medicare is concerned? Thanks in advance.

Minnesota Attorney

Medicare Set Aside Arrangements Terms

My client is a Medicare beneficiary who suffered a neck injury in a Motor Vehicle Accident. Their auto insurance has paid for treatment to neck thus far. Adverse driver policy limits are $25,000 and case will probably settle for less than that. It is unknown if he or she will need any future neck treatment. How do you recommend we deal with MSA issues in such a small case? Also, can you direct me to a site which shows how to establish an MSA? Wyoming Attorney

Responsibilities Of Defense Counsel In Liability Settlement Involving Medicare

Thank you for contacting the Garretson Firm Resolution Group, Inc. ("GFRG") with your MMSEA question. Background: Misunderstanding related to the implementation of the MMSEA has made parties cautious about settling claims, even those which they want to settle. Section 111 reporting requirements have effectively bottlenecked the settlement community. As the standard bearer in the Medicare compliance community, parties on both sides of the negotiating table constantly ask us the following question: “How can we settle claims and still be Medicare compliant in light of the MMSEA?” The reporting delay, while providing the RRE more time to ready itself, does not provide comfort with regard to exposure to Medicare. The insurer/self-insured is still concerned about a few primary issues: 1) how do I ensure Medicare is paid back for conditional payments made from the date of injury to the date of settlement; 2) how do I ensure Medicare’s future interests are properly considered and protected; and 3) how can I avoid the $1,000 per day, per claimant penalty for non-compliance under MMSEA? Likewise, the claimant also has concerns due to MMSEA, such as: 1) what is the extent of my Medicare compliance obligations in the MMSEA world; and 2) how can I ensure that the defense will pay settlement proceeds in a timely manner once a claim is settled? Understanding that claims being settled today, for Medicare entitled injured parties, will have to eventually be reported, we offer the following advice. This settlement solution has dual intentions: 1) to provide the insurer with the knowledge that all Medicare compliance obligations are being handled in a compliant manner such that it will not be liable to Medicare post settlement; and 2) to allow the claimant’s attorney to receive settlement proceeds in a timely manner once the parties have agreed to the terms of the release. The settlement solution essentially creates a series of affirmative obligations on both sides as conditions precedent and conditions subsequent to settlement. Conditional Payments: Reimbursing Medicare for conditional payments (those that were made from date of injury to date of settlement) is a claimant obligation; however, CMS can come back to the payer for reimbursement of conditional payments if they are not satisfied by the injured party. Action steps include the following: •Claimant should open a tort recovery record with Medicare and request a conditional payment listing (“CPL”); and bring evidence of that to the settlement table •Indemnification language included in settlement agreement to protect the defense •Settlement occurs and then the claimant submits the settlement details to CMS along with its procurement costs (case costs and expenses) and requests a final demand. •Defense pays the settlement to the claimant’s attorney with the agreement from the attorney that the net funds will not be paid to the claimant until the reimbursement is completed. •Final demand is received from CMS. •Once reimbursed, CMS will provide the claimant with a copy of the final demand and proof that the reimbursement claim has been satisfied. Obviously, since reimbursing CMS is an affirmative obligation on the claimant, the claimant requires settlement proceeds to handle its obligation in a compliant manner. Defense may be hesitant about disbursing settlement proceeds to the claimant prior to knowing that CMS has been reimbursed for conditional payments made date of injury to date of settlement. The above steps allow CMS to be reimbursed promptly, but also afford the defense a high level of comfort knowing that Medicare compliance obligations linked to settling the claims are being handled in a compliant manner. Future Cost of Care Satisfaction of Medicare’s future interests is a topic of great discussion currently in the settlement community; however, that discussion is misguided. Insurers are being led astray by certain entities attempting to apply the current law and guidance regarding Medicare Set-aside Arrangements (“MSAs”) to the liability context. As it currently stands, the MSA is a tool used in workers’ compensation settlements to protect Medicare’s future interest. All currently enacted laws and guidance regarding the use of MSAs is specific to the workers’ compensation arena, and there is no currently enacted law which mandates the use of MSAs in a liability settlement. In fact, there is not even a statutory definition of the term ‘MSA’ or ‘Medicare Set-aside Arrangement’ at this point. In the absence of any currently enacted law or guidance specific to the use of MSAs in a liability settlement, MSAs are appropriate when the following fact pattern exists – that is, a definitive allocation to future medical expenses in the settlement release or a line item for future medical expenses in a jury verdict form, plus a permanent burden shift to Medicare. Even if MSAs were appropriate in liability settlements today, the insurer/defense do not need to play a role on setting up the MSA. Under currently enacted law, there is no legal liability on the defendant for failing to do so. The current law only provides double damages exposure to an insurer where conditional payment reimbursement obligations exist but were not satisfied. (See 42 U.S.C. §1395y(b)(2)(B)). That responsibility is, and always has been on the Medicare beneficiary’s shoulders (where applicable). I have included a link to our white paper for your reference. Please let me know if you have any questions or need anything further. My best, Marlene Wilson, ARM

Reimbursement Rights For ERISA

Question
A minor was injured, pays 100% of the Erisa lien. He or she will need future scar revenue 4-5 years later. How is the cost determined for the future part of Medicare lien?

Answer
Good morning and thank you for the question. Subrogation and reimbursement rights for ERISA plans are governed solely by the plan language itself. In this case I would look to the recovery elements that the Plan claims an interest. It appears that we are talking about whether or not a Plan is entitled to receive a credit against future benefits. Generally, a Plan will be entitled to reimbursement only for payments made prior to the time the Plan participant settles UNLESS there is specific language creating a right to this credit or the plan has some type of exclusionary language. Assuming that the original agreement between the ERISA plan and the client was a full and final settlement of the plan's claims which arose as a result of the third party injury, the plan would arguably not have a claim for these post settlement treatments.

- Shell v. Amalgamated Cotton Garment, 43 F.3d 364 (8th Cir. 1994)
o No future credit unless specific language (express clause required)
- Qualls v. BC of Cal., 22 F3d 839 (9th Cir. 1994)
o Exclusionary clause can achieve same result as credit
 Refusal to pay tortfeasor caused injuries unless payment considered advancement and granted lien.
 The language stated that benefits would be ADVANCED ONLY to the extent that the plan retained a lien upon a third party settlement. Because there had been a third party settlement and the lien was satisfied, the plan did not have to advance future benefits.

If a plan does not have crystal clear language it would seem there would not be a reimbursement right for future expenses from the settlement funds. Another thing to consider is the language of the settlement agreement. If the settlement funds were allocated for particular damages it could also affect right to future credit (ex. None of these funds are intended to cover future medical expenses/ claims for future medical are waived hence no reimbursement right). I hope you find this helpful and please let me know if you have any additional questions.

Michael Russell, Esq.

ERISA’s Preemption Clause

Question
I represent a man who sustained traumatic brain injuries that have rendered him wheelchair-bound and unable to feed himself. His wife's health insurance is an ERISA plan, self-funded to $150,000 per fiscal year, with stop-loss health insurance beyond that initial amount. The $150,000 deductible was paid twice before my client's wife left her job and the ERISA health insurance coverage ended. The insurer is claiming a lien for over $500,000 - despite paying $300,000 with stop-loss insurance paying the rest. The settlement was for the policy limit of just over $1 million. The IRS 5500 reflects that the funding is 'general assets of the sponsor'. The plan has learned from every case from FMC v. Halliday through Sereboff.

Is the plan subject to GOL 5-335 if, as case law suggests, its right is not statutory in itself but instead controlled by the scope of the plan which is a contractual document? Are my options more academic than practical -- leaving me only to negotiate the best resolution and hold my nose while I pay. The Medicaid lien was settled at about an 8% pro rata share, the ERISA provider is looking for more than 100% of what it paid.

Answer
Thank you for the question. If the plan is in fact self-funded (general assets) with strong language then you may be at the mercy of the plan. While I agree with you wholeheartedly regarding the statutory v. contractual right and the application of GOL 5-335, the real problem is ERISA’s preemption clause. ERISA expressly preempts state laws insofar as they relate to employee benefit plans (29 U.S.C. 1144(a)). HOWEVER, under ERISA this preemption does not apply to those laws which regulate insurance, banking, or securities (29 USC 1144(b)(2)(A). This is known as the savings clause and if an ERISA plan is in fact insured you can use state law defenses. See FMC Corp. v. Holiday, 498 US 52 (1990). If the employer plan provides benefits through a contract with an insurance carrier then the plan can be categorized as insured. On the other hand, if benefits are provided by the assets of the employer (in part or in whole) or through a trust, then the plan will most likely be categorized as self-funded.

Thus, if the plan was insured rather than self-funded, there is strong argument to be made that 1) 5-335 is a law which regulates insurance 2) an ERISA plan’s right is based on contract/equity not statute and 3) an insured plan cannot seek reimbursement because of 5-335. Unfortunately here a self-funded plan enjoys preemption and is not subject to the savings clause. See FMC Corp.

The issue I would focus on here is the stop loss issue. While it is well settled that the existence of stop loss coverage does not change the plan’s designation as a self-funded ERISA plan, we believe that the stop loss coverage can change the scope of a plan’s reimbursement right. As a result I would suggest demanding proof that 1. Any funds claimed over the attachment point would be reimbursed to the stop loss carrier and 2. The stop loss carrier had a right to such reimbursement. A stop loss arrangement provides for payment to the plan over certain attachment points. Without such proof there is the threat of unjust enrichment as the plan may receive a windfall from payments previously received from the stop loss carrier and any reimbursement made from your client. So in your example…

- Plan pays 500k in two years
- Attachment point is 150k per year
- Plan pays 500k but is actually reimbursed by stop loss carrier for anything over 150k per year; in effect plan out only 300k
- Require proof that if your client paid more than 300k, the stop loss carrier would receive those
- Don’t want plan to receive windfall (payment from your client and stop loss carrier)

Having settled the third party claim and dealing with a strong self-funded ERISA plan puts you between a rock and hard place. However you have the stop loss issue in this case. As an industry standard, many recovery vendors will agree to a 1/3 split of the gross proceeds. It is certainly not ideal but under the circumstances it may provide some hope. I would also remember that you have a sympathetic client and recovery vendors and plans look at litigation as a last resort.

I hope you found this response helpful and please let me know if you have any additional questions.

Michael Russell, Esq.

ERISA Rights On Benefit Entitlements

Question
My client was injured in an automobile accident and medical expenses were paid by his employer under an ERISA plan. Subsequently, he died from an unrelated cause. I represent his wife as the personal representative of the estate for the injuries sustained in the accident. No claims have been made against his estate from the ERISA sponsored plan and pursuant to the state law all claims are barred based on the statute running. My question when and if there is a limitation for the presentment of an ERISA lien on a decedent's estate? What authority would speak to this limitation?

Answer
Thank you for the question. First let me say that I have seen attorneys successfully use the argument that an ERISA plan did not assert a claim against the estate in time and thus they have no right. Often times such an argument is used to greatly reduce the claim but not as a complete bar (leverage). As a general matter an ERISA plan’s statute of limitation is controlled by state contract law. This period begins when the plaintiff receives the third party recovery.

There is only one statute of limitations found in ERISA and it deals exclusively with a breach of fiduciary duty. ERISA Section 413. Generally under ERISA there are five causes of action (all found under Section 502). The fiduciary duty cause of action is under Section 502(a)(2) but under the facts of your case this cause of action is not applicable. The cause of action which is applicable is ERISA Section 502(a)(3) which provides appropriate equitable relief to enforce any terms of the plan. When an ERISA plan brings an action to enforce its right to reimbursement it does so under this section. Thus there is no specific statute of limitations in ERISA for these types of cases.

When there is a cause of action based on benefits entitlement or other ERISA rights (not fiduciary claim and thus no applicable SOL in ERISA), federal courts have looked to the most closely analogous state statute of limitations. (Miles v. New York State Teamsters Conference Pension & Ret. Fund Employee Pension Benefit Plan, 698 F.2d 593 (2nd Cir. 1983), Advisory Comm. For Stock Ownership $ Trust for Mont. Banc-system, Inc. v. Kuhns, 1996 US App LEXIS 2273, (9th Cir. 1996); Nikaido v. Centennial Life Ins., 42 F.3d 557 (9th Cir. 1994); Administrative Comm. of Wal-Mart Stores, Inc. v. Soles ex rel. estate of Hollander, 2003 WL 21688109 (8th Cir. 2003); Duchek v. BCBS of NE, 153 F.3d 648, 649 (8th Cir.1998).

Additionally, the Supreme Court has told us that when Congress does not provide a SOL for claims arising under federal statutes, a court should normally apply an appropriate state SOL. Reed v. United Transp. Union, 488 US 319 (1989). As mentioned ERISA plans are limited to seeking “appropriate equitable relief”. 29 U.S.C. § 1132(a)(3)(B) aka Section 502(a)(3). This relief must be sought through the enforcement of the terms of its plan. Because ERISA does not say anything more than appropriate equitable relief, the plan language alone controls the right to recovery. Because an ERISA Plan’s right to recovery is controlled exclusively by the terms of a written plan the most appropriate and analogous state statute certainly has to be the contract SOL. BCBS Alabama v. Sanders, 138 F.3d 1347 (11th Cir. 1998).

I hope you found the response helpful. Thanks.
Michael Russell, Esq.

New York Collateral Source and Anti-Subrogation Amendment Question

Question
Mr. Russell: I apologize for the question to the extent you have already addressed the issue. Here is my concern: MA Plans step into the shoes of Medicare with a statutory right of reimbursement. There is no real issue on this point. However, when the client chooses to participate in a replacement plan, presumably they do so in return for greater benefits than those provided under traditional Medicare. This leads me to believe that subrogation, in New York, is limited only to those benefits that would have been provided under traditional Medicare and not any of the "extras" which are provided by the private insurer as a result of participation in the replacement plan. Have there been any developments regarding this specific concern? As always, your time and expertise is greatly appreciated.

New York Attorney

Answer
Thank you for the question. I think it is a very valid concern and a great point to consider. I wish that I could tell you that there had been some developments regarding this issue. However to my knowledge there have not been any challenges directed at this issue. As you are probably aware there are a number of litigations deciding the issue of the scope of the reimbursement rights but this mainly revolves around whether or not state laws/restrictions can apply and how closely the right mirrors Medicare.

Despite the lack of clarity I would encourage you to focus on these extras. In dealing with such a gray area any leverage can help.

Let me know if you have any questions. Thanks.
Michael Russell, Esq.